Tata Motors shares hit a three-month low as JLR retail sales decline

Shares of Tata Motors slipped as much as 4.12%, thus hitting a three-month low of ₹395 after the company registered a decline of 4.9% in the retail sales of its flagship Jaguar Land Rover in July to September quarter this year, compared to the same time in the year-ago period. According to the regulatory filing by Tata Motors’, JLR retail sales stood at 88,121 units in the July to September quarter, compared to 92,710 units in the same period last year. 

Following this, JP Morgan has downgraded Tata Motors' rating from overweight to neutral, while slashing its target price of ₹525 to ₹455. The company hit a 52-week high of ₹536 on November 17, 2021, and a 52-week low of ₹366 on May 12, 2022. 

Meanwhile, compared to the April-June quarter this year, JLR retail sales surged 12%, with an increase of 9,296 units in the September quarter.

“Compared to the first quarter, retail sales were higher in China (+38%), North America (+27%) and Overseas (+14%) but were lower in the UK (-7%) and Europe (-10%),” the company said in a statement. 

For the September quarter, JLR’s wholesale witnessed only a 4% surge at 75,307 units compared to the June quarter, owing to the chip shortage. “This improvement was lower than planned, primarily due to a lower than expected supply of specialised chips from one supplier which could not be readily re-sourced in the quarter. This was mitigated partially by further prioritisation of production to the highest margin products, while new agreements with semiconductor suppliers are expected to enable sales improvements in the second half of the fiscal year,” the company said. 

Meanwhile, in the September quarter, the company registered the production of 13,537 units of New Range Rover and New Range Rover Sport, compared to 5,790 units in the June quarter this year. Compared to Q1, the company’s JLR booking was up 5,000 units at 2,05,000 units in Q2. 

“Demand for the New Range Rover, New Range Rover Sport and Defender remain strong, accounting for over 145,000 of the 205,000 orders,” the company said. 

“The company expects free cashflow to be near break-even despite the lower than expected wholesale volumes, based on preliminary cash balances of £3.7 billion. Free cashflow in the second half of the fiscal year is expected to be positive driven by sequential improvement in wholesale volumes,” the company added.